Despite growth in govt expenditure, GDP slowdown continues

The economic slowdown continues as India’s GDP growth slipped to 4.5 per cent during the July-September quarter, a straight decline for seven consecutive quarters now. All eyes will now be on what steps the government will take next, as finance minister Nirmala Sitharaman had spelt out three dozen measures the government had taken to arrest the slowdown early this week in Parliament.

While several sectors grew at 7 per cent or more during Q2 2018/19, overall growth has dipped further this year. Private consumption almost halved and fixed gross capital formation moved to the negative territory. Government expenditure was the only component which grew compared to the corresponding period of the previous year.

The Q2 data released by National Statistical Office (NSO), Ministry of Statistics and Programme Implementation states that GDP at Constant (2011-12) prices in Q2 of 2019/20 is estimated at Rs 35.99 lakh crore, against Rs 34.43 lakh crore in Q2 of 2018/19, a growth rate of 4.5 per cent.

Growth rates of Private Final Consumption Expenditure (PFCE) at current and constant prices are estimated at 7.8 per cent and 5.1 per cent during Q2 of 2019/20 as compared to 14.4 per cent and 9.8 per cent respectively during the same period of 2018/19.

Growth rates of Government Final Consumption Expenditure (GFCE) at current and constant prices are estimated at 18.9 per cent and 15.6 per cent respectively during Q2 of 2019/20 against 15.4 per cent and 10.9 per cent during the same period of 2018/19.

Growth rates of Gross Fixed Capital Formation (GFCF) at current and constant prices are estimated at (-) 0.9 per cent and (-) 3 per cent during Q2 of 2019/20 against 16.2 per cent and 11.8 per cent during the same period of 2018/19.

The economic activities which registered growth of over 4.3 per cent in Q2 of 2019/20 over Q2 of 2018/19 are ‘Trade, Hotels, Transport, Communication and Services related to Broadcasting’ ‘Financial, Real Estate and Professional Services’ and ‘Public Administration, Defence and Other Services’. What pulled down the growth substantially was agriculture, mining, manufacturing and construction.

The quarterly gross value added (GVA) for Q2 2019/20 from ‘Agriculture, Forestry and Fishing’ sector grew by 2.1 per cent as compared to growth of 4.9 per cent in Q2 2018/19.The crops including fruits and vegetables account for about 43 per cent, livestock 39 per cent and forestry & fisheries 18 per cent share of GVA in total GVA of ‘Agriculture, Forestry and Fishing’ sector.

Quarterly GVA at Basic Prices for Q2 2019/20 from ‘Mining and Quarrying’ sector grew 0.1 per cent as compared to -2.2 per cent in Q2 2018/19.  Quarterly GVA at Basic Prices for Q2 2019/20 from ‘Manufacturing’ grew by (-) 1 per cent as compared to 6.9 per cent in Q2 2018/19. The growth of organized sector (which has a share of more than 75 per cent in Manufacturing) was estimated from available data of listed companies with BSE and NSE.  IIP Manufacturing registered growth rate of (-) 0.4 per cent during Q2 of 2019/20 compared to 5.6 per cent during Q2 of 2018/19.

Quarterly GVA at Basic Prices for Q2 2019/20 from ‘Electricity, Gas, Water Supply and Other Utility Services’ sector grew by 3.6 per cent as compared to growth of 8.7 per cent in Q2 2018/19. The key indicator of this sector, namely, IIP of Electricity registered growth rate of 0.4 per cent during Q2 of 2019/20 against 7.5 per cent in Q2 of 2018/19.